Gold prices fell more than 1 percent on Friday to their lowest in three sessions, after data showed U.S. non-farm payrolls fell by less than expected in August, boosting the appeal of assets seen as higher risk.
Spot gold slipped to a low of $1,235.70 an ounce and was bid at $1,240.50 an ounce at 1315 GMT, against $1,250.74 late in New York on Thursday. U.S. gold futures for December delivery fell $9.50 to $1,243.90.
U.S. employment fell for a third straight month in August, but the decline was far less than expected and private payrolls growth surprised on the upside, easing pressure on the Federal Reserve to prop up growth.
Non-farm payrolls data has come out much better than expected -- the consensus was for job losses of about 100,000, it has come out at 54,000, said Societe General analyst David Wilson. Gold is losing a bit of momentum.
However, recent U.S. data has tended to still point toward a relatively soft recovery, he said. There is still an overall sense of caution, which should still be supportive for gold.
Gold has benefited in recent weeks from concerns that weak growth would push the Fed into further quantitative easing measures, which could ultimately prove inflationary.
The dollar fell versus the euro in the wake of the data, though it climbed versus the Japanese yen, as the numbers boosted appetite for higher-yielding currencies.
Stock markets extended gains in Europe to a fresh three-week high as the report surprised on the upside, while U.S. stock index futures also rose. .EU .N
German Bund futures meanwhile fell to session lows, while U.S. Treasuries prices widened losses.
Among other commodities, U.S. crude futures rose after the report, reaching a high of $75.44 a barrel, though they later pared gains. Base metals like copper and aluminum rose.
ETF HOLDINGS FALLS
Recent strength in gold prices notwithstanding, physical demand for the precious metal was muted.
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust (GLD.P), reversed the inflows it reported over the last week, with its holdings falling more than 9 tons to 1,294.908 tons on Thursday.
Meanwhile, Indian gold buying was muted for a second day on Friday as traders were cautious about placing fresh orders after prices traded near a record high, dealers said.
Surging prices have weighed heavily on the price-sensitive Indian market in recent years. However, market watchers have noted some tentative signs of recovery in demand as buyers become acclimatized to higher prices.
Indian festival seasonal demand looks set to be healthy, said bullion dealer Goldcore in a note.
Among other precious metals, silver was bid at $19.59 an ounce against $19.58, having earlier matched the 3-1/2 month high at $19.68 an ounce it hit on Thursday.
Technical analysts at Barclays Capital said the metal had re-established its uptrend after breaking through its June high at $19.47 an ounce earlier this week.
We are bullish on silver, looking for an eventual test of the 2008 high of $21.35, said ScotiaMocatta in a note.
Elsewhere platinum was at $1,553 an ounce against $1,543.10, while palladium was at $523.50 versus $520.93.
(Editing by James Jukwey)